Mamaearth’s parent company, Honasa Consumer, has received a lukewarm response from institutional investors during its public issue. Prior to its initial public offering (IPO), the company managed to raise a substantial amount of ₹765 crore from anchor investors.
On the first day of the issue, the IPO saw a subscription of only 12%. This lack of enthusiasm was observed across all classes of investors. It is common for qualified institutional buyers (QIBs) to show minimal interest on the first day, but even the non-institutional investor portion was only subscribed by 3%.
Retail investors, on the other hand, showed slightly more interest, with 30% of the retail book receiving bids as of Tuesday. The IPO allocates 10% to retail investors, 15% to non-institutional investors, and the remaining 75% to QIBs. The IPO will close on November 4, and the price band for the issue has been set at ₹308-324. Investors can bid for a minimum of 46 shares in multiples.
Prior to the IPO, the company successfully raised ₹765 crore from anchor investors. Notable investors include Abu Dhabi Investment Authority (ADIA) and Goldman Sachs Singapore.
Honasa Consumer, known for its brands in the beauty and personal care space, including Mamaearth, has faced challenges in generating profits. In FY23, the company reported losses due to an impairment loss of ₹154 crore. This was a result of scaling down the majority of business verticals of Momspresso, a content platform acquired by the company.
The company plans to utilize the net proceeds from the IPO for various purposes, including advertising expenses, setting up exclusive brand outlets, investing in subsidiary BBlunt, general corporate purposes, and potential acquisitions.
With ad expenses accounting for 34.99% of its revenue from operations, Honasa Consumer operates in an extremely competitive segment. The company acknowledges the risk factors associated with larger competitors that have greater resources to spend on advertising, marketing, and offering substantial discounts.
Despite the challenges, the company has shown significant growth, with a revenue CAGR of 80% from FY21-23 and a volume growth of 102.28%. Canara Bank Securities has given the company a “subscribe for the long-term” rating, noting its adjusted EBITDA of 3.4% in FY23 and negative working capital due to its asset-light model.
Overall, Mamaearth’s parent company faces the acid test as it navigates the IPO and aims to position itself as a prominent player in the direct-to-consumer (D2C) market.
I have over 10 years of experience in the cryptocurrency industry and I have been on the list of the top authors on LinkedIn for the past 5 years. I have a wealth of knowledge to share with my readers, and my goal is to help them navigate the ever-changing world of cryptocurrencies.
